WHAT IS PERSONAL FINANCE ?
Personal finance is a term used to cover money management, such as savings and investments. It also includes budgeting, banking, insurance, mortgages, investments, taxes, pension plans, and real estate plans. Overall, it includes how to develop a plan that will optimally use your income and savings so you can achieve your financial goals and dreams.
Why is personal finance important?
Understanding your personal finances will help you manage your money so that you can live the lifestyle you want now and for the next few years. A proper plan will help you maximize your target income, such as saving for retirement, buying your own home, saving your child’s college training. You can also have personal insight into your current relationship with money and show you steps to improve.
Five areas of personal finance
These are five areas that are extremely important for your personal financial plan design.
1. Income
Earnings are the money you earn from your work and other sources like Investment and dividends. It’s the full cash inflow you’ve earned from all sources.
2. Cost
This is the money she spends on rent, mortgage, food, hobbies, travel, entertainment, and more. If you monitor costs, you can avoid costs and reduce the likelihood of collecting debt.
3. Savings
This is the money left after calculating the costs. These funds can be presented for emergencies or large future purchases such as down payments on homes. If you want to save regularly, you can be prepared for changes in your income and expenses.
4. Investment
Investments usually include the purchase of assets, including stocks,bonds, investment funds and other investments, aim to achieve return on capital by taking risks and expanding assets over the long term.
5. Protection
This refers to insurance contracts to protect themselves, their parents, and assets from unexpected events (such as accidents, illnesses, natural disasters, etc.). Protection solutions include life insurance, health insurance, real estate planning and retirement clauses.
Personal Financial Planning Process
Good financial management is intended to create a solid plan and capture it. All areas of personal funding mentioned above can be integrated into a budget or formal financial plan.These plans are often created by individual bankers and investment advisors who understand their needs and goals and work with their clients to develop the right procedures.In general the main components of the financial planning process are:
1- Evaluation
2- The Goal
3- Planning and development
4- Execution
5- Monitoring and reassessment
How does personal finance help?
Personal fundraising helps you manage your monthly or daily expenses properly, achieve your savings, invest in achieving your goals, secure money for emergencies and retirement and have travel and entertainment money. Understanding how you can manage your finances is an important way of living planning that will help you live your life without debt, allowing you to control your financial stress and manage the expensive surprises that life throws at you. The earlier you start with financial planning, the better this is as it helps you achieve your goals and give yourself and your family financial freedom and security. You will learn personal financial management from your family and yourself through your mistakes.
